Week ending 16th August 2025

# 1 Markets

Indian equity markets were buffeted by global uncertainty, weak cues from Asian peers, and ongoing foreign investor selling, but supported by steady domestic institutional buying. Aggregate revenue and profit expansions touched multi-year lows in the June quarter on a muted performance across sectors such as banking, consumer durables and capital goods. Sensex (80,597.66) and Nifty (24,631.30) ended the week nearly flat, eking out marginal gains after several volatile sessions. Markets may continue consolidating, with direction set by global news flow, domestic macro data, and foreign flows. Trump hinting of pausing secondary tariffs post Putin meet at Alaska may sway the markets on Monday.

The Indian bond market this week showed volatility with 10-year government bond yields fluctuating around 6.40% to 6.49%, hitting the highest levels since April amid concerns of higher bond supply and US tariff impacts. Despite a low inflation print of 1.55%, market expectations for further RBI rate cuts have diminished, maintaining a cautious sentiment ahead of key debt auctions and inflation data.

US equity markets hit new record highs this week, led by robust gains in tech mega caps and fresh optimism around potential Fed rate cuts after soft inflation data. Volatility re-emerged midweek following a mixed inflation report and renewed tariff concerns.

A stronger-than-anticipated inflation reading spurred a rise in bond yields and the dollar, with traders trimming bets the Federal Reserve will cut interest rates next month. Treasury two-year yields climbed four basis points to 3.72% while the 10-year yield went up to around 4.31%-4.32%.

# 2 RBI

2.1 RBI on August 14 approved Indian Banks Digital Infra Company [IBDIC]’s enterprise-blockchain platform—the first sandbox exits under the theme-neutral model—signalling regulatory comfort with production-scale deployment. Key movers:

• Targets MSMEs facing a funding gap by accelerating access to working capital.
• Buyer-approved invoices are tokenised; MSMEs (including tier-2/3) can discount these tokens with banks for near-immediate liquidity.
• A shared, permissioned ledger curbs duplicate invoicing/manipulation, reduces paperwork and delays, and lowers credit risk; aligns with data-localisation and compliance norms.
• Sandbox exit indicates the model’s viability under real-world conditions, distinct from public crypto networks.
• Participation by ICICI Bank, HDFC Bank, Yes Bank, and Aditya Birla Capital provides credibility and network effects, easing onboarding for smaller lenders and MSMEs.

This is enterprise blockchain solving a real financing friction at scale—not a crypto experiment. Flow-based lending expands MSME access while strengthening controls against fraud and duplicate financing. Winners will be those who build distribution into anchors/MSMEs, tight core-banking integrations, and superior risk models—not those with technology alone.

2.2 As per report released by Morgan Stanley last week

• Consumer loan growth in India has bottomed out; Y-o–o-growth dropped from 31% in the Q1 FY23 to just 8% in Q4FY25, marking a significant moderation in lending activity.
• Reasons: RBI’s higher risk weights, rising delinquencies, and tighter lender caution.
• Recovery expected as credit costs moderate, but early and late-stage delinquencies remain elevated, highlighting asset quality risks.

2.3 Insolvency and Bankruptcy Code Amendment Bill – A missed opportunity

Key Features

• Proposal to bring Creditor Initiated Insolvency Resolution Process [CIIRP] – This is a a high-litigation proposal as it starts the insolvency process without judicial intervention at the admission stage.
  • On paper, this might save time; in practice, it is likely to be the most litigated provision of the Bill.
  • Experience with SICA and SARFAESI suggests this risks becoming a repackaged Pre-Packaged Insolvency Resolution Process [PPIRP]—adding procedural layers and judicial delays without the speed of a true pre-pack model.
• Withdrawal from insolvency under Section 12A now requires approval from the Committee of Creditors (CoC), replacing the earlier provision allowing pre-CoC settlements with 90% creditor consent –
  • On paper, reduces collusion risk through informal pre-CoC exits.
  • But in practice, even small creditor blocks (>10% voting share) (an operational creditor with no CoC vote) can veto settlements, raising negotiation complexity.
• Only the Interim Resolution Professional (IRP) can apply for withdrawal, and only after CoC formation but before the first request for resolution plans; early or late exits are barred
  • More cases to undergo full CIRP extending resolution duration.
• Proposes pooling PG assets into the corporate debtor’s CIRP.

• While the IBC remains the primary mode, lenders often seize assets of under various other laws which stay with the individual banks themselves. The amendment will bring all of them within the common pool for resolution.

• • Bill, however, does not resolve secured-creditor priority rules despite past committee recommendations (Likely inter se priority disputes where lenders have exclusive security on guarantor assets not addressed)
• Partial curbs on misuse of interim moratorium
  • Personal Insolvency gap still unaddressed: Secured creditors can still stay outside unless they relinquish security; look-back periods tied to bankruptcy commencement may render suspect transactions time-barred by the time orders are passed.
• High consensus requirement remains for post-admission withdrawals.
  • All settlements must occur within the CoC framework; NCLT must decide within 30 days of application.

The Bill delivers incremental tweaks but sidesteps structural bottlenecks. Likely outcomes: more litigation, longer timelines, and continued value erosion. Missed was the chance to relax Section 29A for clean promoters to accelerate viable resolutions. Instead, CIIRP, Section 12A curbs, and PG pooling risk fuelling disputes. The core issues—judicial backlog, unclear creditor priorities, weak enforcement, and lack of sector-specific design—remain unresolved. What India needs is a true pre-pack model, targeted 29A relaxation, clear inter se priority rules, and judicial capacity-building. Without these, the IBC will remain mired in inefficiency, value destruction, and misuse.

# 3 SEBI

3.1 SEBI on Wednesday proposed a comprehensive rewrite of its 30-year-old Stockbrokers Regulations to simplify compliance and align the rules under Companies Act 2013 and today’s tech-driven markets.

Key takeaways

• Formal definitions added (e.g., algorithmic trading, execution-only platforms, proprietary trading) to reflect electronic markets and rapid settlements.
• Record-keeping permitted entirely in electronic form; legacy, physical-era registers (e.g., intra-exchange broker-to-broker books) removed.

• Enabling provision for stockbrokers to (a) access the NDS-OM platform for trading government securities (b) undertake specified securities market activities in GIFT–IFSC via a separate business unit.

• Company-structured brokers must have at least one designated resident director (≥182 days/year)
• Prior SEBI Board approval mandatory, for change in control routed through a member exchange—centralized, single-window approval to reduce ambiguity.
• “Qualified Stockbroker” (QSB): Tag assigned on five quantitative metrics—active clients, client assets, trading volumes, end-of-day client margin obligations, and proprietary volumes (qualitative compliance/grievance scores dropped as entry criteria).

The proposal enables lower compliance friction via a consolidated, tech-neutral rulebook.
Stronger oversight raises accountability and provides greater investor protection.

3.2 SEBI in its annual report published last Tuesday indicated that a comprehensive rationalisation of regulations is targeted this year to remove redundancies and ease compliance to enable attract long-term capital. Highlights:

• Proposal for a single-window clearance for low-risk overseas investors (sovereign wealth funds, government-owned investment firms, and certain pooled retail vehicles) to streamline market entry.
• Focus on optimising and consolidating rules, reducing duplicative filings and procedural friction for market participants.
• Proposed easier disclosures and shareholder approval requirements for low-value related-party transactions to tighten oversight with proportionate burden.
• Planned cybersecurity upgrades and enhanced surveillance to detect threats/manipulation, with a sharper lens on derivatives trading (context: recent bar on Jane Street).

Regulatory simplification and single-window access for low-risk FPIs should reduce onboarding friction and compliance costs, supporting steadier long-term foreign inflows and broader institutional participation.

3.2 SEBI is proposing two significant schemes as per its draft proposal published last week

• Allow IFSC-based retail schemes sponsored/managed by resident Indian non-individuals (term aligned to Fund Management Entity (FME) or its associate) to register as FPIs
  1. resident Indian non-individual FME/associate may contribute up to 10% of the corpus for retail schemes.
  2. Overseas mutual funds/unit trusts registered as FPIs may include Indian mutual funds as constituents.
• Launch SWAGAT-FI (single-window, automatic and generalised access) to streamline market entry and compliance for low-risk foreign investors.
  1. Low risk cohorts to include Government/sovereign funds, central banks, multilateral entities, highly regulated public retail funds, appropriately regulated insurers, and pension funds.
  2. Unified registration across routes, reduced repeat documentation, and easier investment access for trusted foreign investors.

3. As of 30 June, 11,913 FPIs held ₹80.83 trillion in assets; SWAGAT-FIs are estimated to account for >70% of FPI assets under custody.

The proposals are not only aimed at broadening Indian participation in international vehicles (via IFSC) but also lower operational friction for large, regulated foreign pools of capital by simplifying compliance

# 4 Economy

4.1 Income-tax (No. 2) Bill, 2025 – Passed by Parliament (Rajya Sabha cleared on 12 Aug 2025); commencement from 1 April 2026 (applies to Tax Year 2026–27). Assessments for FY 2025–26 continue under the 1961 Act. Key takeaways:

What is unchanged

• No change to slabs or corporate rates in the Bill (these continue to be set via Finance Acts).
• Frameworks retained: GAAR; Transfer Pricing regime (APAs/safe harbours); residency rules (including POEM); pass-through architecture for investment funds/business trusts substantially preserved.

What is streamlined

• Single “Tax Year” replaces the “previous year/assessment year” construct; Treat FY 2026–27 as the first Tax Year under the new Act.
• Faceless, digital-first administration codified (faceless information collection/assessment; scheme-making powers; time-limit architecture consolidated). Taxpayer Charter retained.
• Nil/Lower TDS certificate mechanics clarified TDS refund claim after ITR due date permitted.

• Explicit treatment of anonymous donations for nonprofit/charitable trusts: practical carve-out retained (exemption for purely religious trusts), and quantitative threshold articulated (₹1 lakh or 5% of anonymous donations, whichever higher) before taxation. Registration/approval timelines tightened.

• Data governance: treat cloud/email/third-party platforms as “books/records” for search—strengthen indexing, retention, legal hold and access-control policies.

In short, revised IT Bill seeks to modernise and simplify compliance, with progressive reliefs and easier processes for taxpayers. Risks remain—data privacy, potential state overreach, and litigation, success hinges on implementation, judicial oversight, and public consultation.

4.2 Standard & Poor has raised India’s long-term sovereign credit rating from BBB- to BBB, the first upgrade since 2007. This moves India one notch above the lowest investment-grade level where it had been for 18 years. Reasons:

• Strong GDP growth improved fiscal consolidation, better quality of public spending (especially on infrastructure), anchored inflation expectations, and resilient domestic consumption (60% of GDP) quoted as reasons for upgrade.
• US Tariff impact “manageable” given India’s low trade dependence.
• India’s growth to touch 6.6% in FY26 and average 6.8% over the next three years, after 8.8% annual expansion in the three years through FY24 — the highest in the Asia-Pacific region.

Moody’s rates India at Baa3 (stable) and Fitch at BBB-, both at the lowest investment grade.

Impact

• Potential reduction in the Centre’s borrowing cost – likely savings up to 20 bps.; current ECB borrowings is upwards of 7.2-7.5% on a full-hedged basis for top-rated companies – could be lower by 30 bps. Now, more predictable access to global capital for corporates.
• Stronger positioning for India as an investment destination, particularly for debt flows, though foreign portfolio debt inflows remain cautious in FY26 YTD.
• Near-Term Risks: Possible widening of the current account deficit (~1% of GDP in FY26 estimates) and uncertainties from trade tensions; however, domestic demand and macro stability are expected to absorb shocks.
• SBI Research expect limited immediate impact on G-Sec yields (10-year in 6.35–6.50% range), though improved ratings could gradually steepen the curve in a rate-easing cycle.

S&P’s BBB rating on India was last witnessed in 1990. While upgrade is any way, overdue, it signals gradual global recognition of India’s growth and fiscal discipline. However, for equity markets, existing positive momentum is driven more by structural strengths than by ratings.

4.3 India’s July 2025 Trade Data

• Merchandise Trade Deficit: Widened to an 8-month high of $27.35B in July (vs. $32.8B in Nov 2024) as imports rose faster than exports.
  • Merchandise exports rose to $37.24B (from $35.14B in June).
  • Imports surged to $64.59B (from $53.92B in June), driven by petroleum & crude, electronics, and machinery.
• Overall Trade (Goods + Services):
  • July exports: $68.27B; imports: $79.99B.
  • Overall trade deficit rose to $11.72B (vs. $3.51B in June, $10.10B YoY).
• Services Trade: Exports at $31.03B (down from $32.84B in June), imports at $15.40B (down from $17.58B).
• About 50% of India’s US exports (garments, leather, gems & jewellery) could be hit by 50% US Tariff though US exports ≈ 2% of India’s GDP.

India’s merchandise trade deficit hit an eight-month high in July as import growth outpaced exports, driven by petroleum, electronics, and machinery. With fresh US tariffs set to impact nearly half of India’s exports to America, external headwinds are likely to weigh on trade performance in the coming months.

4.4 As per data released last week

• CPI inflation eased to 1.55% y/y in July (vs 2.1% in June vs. 3.6% in July 2024) — lowest since June 2017; sub-4% for the fifth straight month.
  • Decline led by food prices −1.76% y/y (biggest fall since at least Jan 2019); drop sharper in urban than rural areas.
• Core inflation ~4.1% (July 2025), indicating stable demand conditions despite headline undershoot.
• RBI revised its FY26 inflation forecast to 3.1% (from 3.7%).

Lower inflation supports accommodative stance but may pressure farm incomes and cap nominal GDP/earnings/tax and credit growth if sustained. While some see room for rate cuts if growth weakens or external shocks bite, others expect no further easing near term. However, we need to watch out for potential US secondary sanctions on Russian crude and global oil dynamics.

# 5 PE/VC

5.1 Interesting data points from Hurun India Most Valuable Businesses List 2025 published last week

1. Combined wealth of top 300 business families at Rs. 134 trn. exceed GDP of Turkey and Finland.
2. These business families generated Rs. 7100 cr.in value every single day.
3. Families with businesses worth $ 1 bn up from 124 last year to 161.
4. Top 3 family businesses in priority would include – Ambani (Rs. 28 trn.), K M Birla (Rs. 6.48 trn.), Sajjan Jindal (Rs. 5.71 trn)., followed by Bajaj, Mahindra, Nadar, Murugappa, Premji and Anil Agarwal.
5. Most valuable first-generation family businesses – Adani (Rs. 14 trn.,), Poonawalla (Rs. 2.28 trn), Divi (Rs. 1.81 trn).